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On Tuesday, Evercore ISI analyst Durgesh Chopra maintained an In Line rating and a $12.00 price target for Hawaiian Electric (NYSE:HE) shares following legislative developments in Hawaii. The utility company, currently trading at $10.47, has seen its shares decline by about 8.5% over the past year. According to InvestingPro analysis, the company appears slightly undervalued based on its Fair Value assessment. Two significant bills, SB897 and HB982, have successfully crossed over chambers in the state’s legislative session, signaling a push for the establishment of a wildfire insurance fund, the implementation of securitization measures, and the setting of liability limitations.
The analyst noted that both bills had initially proposed a substantial shareholder contribution of approximately $500 million to the insurance fund, a figure that is notably large in relation to Hawaiian Electric’s current market capitalization of $1.87 billion. The company’s financial health metrics from InvestingPro show a current ratio of 1.61, indicating sufficient liquid assets to meet short-term obligations, though its total debt stands at $3.33 billion. However, the latest versions of the bills have omitted specific details regarding shareholder contributions.
The two pieces of legislation differ in several respects. SB897 specifies an initial fund contribution of $1 billion, while HB982 does not set a definite amount. Furthermore, SB897 introduces a fixed liability cap, which is the lesser of $500 million or a value determined by a property value-based formula. Conversely, HB982 suggests a liability cap that is either 50% or more of the fund’s total available resources or a figure derived from its own property value-based formula. Another distinction lies in the accountability of utilities for damages; HB982 holds utilities responsible for imprudent conduct, whereas SB897 requires a higher threshold of gross negligence for liability.
The next significant date for these legislative measures is April 10, 2025, which is slated as the second crossover date. This will be a critical juncture for further revisions and potential finalization of the bills. The outcomes of this legislative process could have implications for Hawaiian Electric’s operations and financial responsibilities in the state. Investors seeking deeper insights can access comprehensive analysis and additional ProTips through InvestingPro, which offers exclusive financial metrics, Fair Value calculations, and detailed research reports for over 1,400 US stocks, including Hawaiian Electric.
In other recent news, Hawaiian Electric Industries faced significant financial challenges in Q4 2024, reporting a full-year loss of $1.3 billion largely due to $1.9 billion in pre-tax wildfire settlement accruals. Despite these setbacks, the company achieved a 36% renewable portfolio standard and sold 90.1% of American Savings Bank for $450 million. Evercore ISI analyst Durgesh Chopra raised the price target for Hawaiian Electric shares to $12.00, reflecting a positive Hawaii Supreme Court ruling on wildfire-related legal actions that could reduce legal uncertainties. Jefferies analyst Julian Dumoulin-Smith maintained a Hold rating on the company, citing ongoing legislative efforts to mitigate wildfire risks. The company’s proactive approach to wildfire legislation is seen as crucial, although the outcome remains uncertain. Hawaiian Electric plans to invest approximately $450 million in a wildfire safety strategy over the next three years. The company aims to return to an investment-grade credit rating and expects its first settlement payment in late 2024 or early 2025. These developments are being closely monitored by investors, as they could significantly impact the company’s operations and risk management strategies.
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